Friday, August 15, 2014

Loosening the beer ties between pubs and corporations? I’ll drink to that

Article in the Guardian Thursday 14 August 2014

Good article in principle - but way too easy on the tied pubco's usurious business practices which are to asset strip their estates by churning successive tenants through their pubs. The fact is the whole business of the tied pubco business model is a massive money grabbing scam.

It's in the interests of pubco's to have new tenants coming into the low end pubs that don't make huge turnover because very new tenant invests a 'modest*' amount of capital going into running their new business in the pubco's pub - and when their business fails the pubco charges them for building dilapidations and breach of contract on the way out. This makes for a classic low cost entry high cost (the shirt off your back) exit for waves of successive tenants while the pubco's income stream from their pubs continues unabated. The only problem for the pubco's is that their estates are so run down now that it's becoming harder to convince prospective tied lessees that their skills, efforts, enthusiasm, elbow work on top of a few tens of thousands of their hard earned savings will be enough to turn a serially failed business into a financial success that will repay their investment.

Decades of this situation of chronic under-investment in the fabric of the national pub estate has resulted in the situation that is in plain sight all over the UK - we see pubs everywhere, nowhere is immune from it, pubs that are quite obviously run down to breaking point no longer fit for purpose as catering businesses yet still being marketed by pubco's with banners outside: 'YOU could run this great local business!' - we've all seen them - These adverts are clearly disingenuous - IF this pub was a great business - it wouldn't be on the market. By default EVERY new tied lease promoted by a pubco is a contract to start from scratch in a successively failed business that needs substantial investment if it has a snowflake in Hell's chance of succeeding.

On top of the knackered state of the pub buildings which the pubco's take no responsibility for - because it is their successive tenant's who have failed to keep up with fully repairing and insuring building maintenance obligations - the tied rents are more than open market (various ALMR benchmarking surveys) and the supplies of beer from pubco's to tied tenants start at DOUBLE open market prices (CAMRA, IPPR, BIS, et al various studies) and it is simply impossible for tied pubs to compete with their free of tie neighbours, generally pub chains and concept led branded outlets whose premises are invested in and whose profit margins are much higher, even if they sell their beers for less than the tied pubs do. It is a total tuck up - tied tenants don't have a chance.

This remarkably socially damaging business construct that is impacting adversely on pubs people and places all over the country, something we seem to believe is culturally inevitable because of the ravages of time and changing patterns of consumer behaviour is simply the outcome of bad management of the pub sector by White Collar Cultural Criminals whose short term tenure of the British Pub estate is to extract as much cash as possible to pay interest on debts they raised to buy the pubs they never have a chance of owning. It's called the Great British Pubco Scam... and is happening in a pub near you.

There is much evidence that pubs invested in are financially successful. The tied model stifles investment and makes pubs fail serially until they are sold off suitable for alternative use - proven to be no longer economically viable - and they become Tesco locals, betting shops or residential and scar our social landscape for all time. The only general market response to this calamity is a gestative movement of individual Micropubs and communities rallying to buy their Locals and run them under (usually) a cooperative IPS set up on a pub by pub basis. The only possible means of stemming the torrent of pub closures nationally (latest figures are 31 a week without taking into account serial pub business failures) is government intervention - legislating against proven bad business practices of pubco's is going through the commons now but is unlikely to come out with Market Rent Options and the right for tied tenants to opt out of their toxic supply contracts...

The outlook is bleak, we ain't seen nothing yet. Boarded up pubs and Tescos are just the thin end of the wedge.

*modest in these terms is between £10K and £100K - pubco's advertise their contracts as 'low cost entry' into the pub sector. Type: "tied lease low cost entry into business" into google and see how many results from pub companies and family brewers come up - 'modest' is relative compared to buying a freehold but 'modest' is simply not enough when these buildings need comprehensive refurbishment to make them fit for purpose, modest just gives them a shot in the arm while on life support of the energy provided by fresh, keen, hard working new tenants)


  1. The usual rhetoric, but just a few factual inaccuracies to point out:

    Tied prices do not start at double FOT, even before discounts. FDFYL best go was 1.75 before discounts.

    Tied pubs become vacant because tenants move to other tenancies, buy freeholds, die, retire, start greengrocery businesses.....not all are failures.

    Careful reading of the ALMR surveys will show that no direct comparison is made between tied and FOT rents.

    Interestingly the Guardian article fails to mention that 74% of tied tenants would sign up again (CGA 2013 survey).

    1. You like rhetoric? Check this and come back to me on the flatulence that Brigid Simmonds comes out with. The reason stat regulation is coming is because everything people like me say is as you call it 'rhetoric'

  2. That's a link to Star, not BBPA.

    Any response on the factual inaccuracies in what you say? If your facts are incorrect it must make the casual reader less likely to accept the rhetoric.